Bitcoin: The Difference Between Price & Value

The Crown Jewels

Many people get confused between Price & Value. Price is the result of social factors relating to the supply & demand at a specific time in a particular market, such as an auction.

Value is circumstancial & derived by personal perception, which is fundamental. Therefore, Price is social, specific & particular whereas Value is fundamental & perceived by circumstance.

One of the best metaphoric examples to illustrate the difference is the Crown Jewels. The Crown Jewels are extremely valuable & yet priceless at the same time. This is due to the revenue they generate from tourism, which is related to how precious they are & down to their historical significance. However, their material value is far less than the revenue they generate. This means their intrinsic value to the state is tied fundamentally to their circumstances & are not worth selling. Therefore they don’t have a price and are considered “priceless”.

Whereas price is specific at a particular moment in time & governed by the laws of supply & demand in the market, which are the social factors, value is at its core. This is why the value is often referred to as either intrinsic or fundamental. Intrinsic value is the personal value that someone might give to something dependant on personal circumstances. It may be valuable to them personally but not to the open market. This applies to Fiat currency, for example, £1 GBP might purchase a loaf of bread in the UK but it is utterly worthless as a Medium of Exchange within another economic area such as the USA. The GBP must first be exchanged to USD to be used as a MoE in the USA. This is because it has no fundamental value.

Value can be thought of as “structural value” or “core value”, something that is fundamental to the open market & therefore commands a similar price in every market no matter where that might be in the world. A good example of this would be the value of Gold because it has a global value & therefore commands that same value in a currency not matter which country it is sold in.

This same principle can be applied to cryptocurrency. If a “cryptocurrency” has a central point of authority or control then it is of no value to anyone that doesn’t require the specific good or service that it provides a Medium of Exchange for. In effect, any Medium of Exchange that has a central point of authority is nothing more than a utility token directly related to the specific market it was created for e.g Fiat currencies & there respective economic areas. Binance token (BNB) is a great example of a utility token. If the Binance exchange were to cease trading the value of it’s token would immediately be worth absolute zero. The same applies to pre-mined “currencies” like XRP that provide cross-border settlements for financial institutions. It only has a value to its users, specific to the cost of its competitive alternative, which is currently the swift system.

Scale & utility are also of fundamental value to a cryptocurrency. We’ll use BTC & BCH as examples. BTC can only manage x7 transactions per second on its network. This means that it is limited to a very small number of users & therefore is of no use or value to anyone who can’t use it. BCH is wanting to provide anonymous transactions which means it offers no legal recourse, which is fundamental to being useful within a trade. This means commercial/global trade will never use it which then prevents the rest of the world from using it. A closed market is therefore created for each giving them both a fundamental value of zero.

If a digital asset is described as a “cryptocurrency” & it is not related to a specific good or service then its price is purely a speculative price against the fundamental value of Bitcoin. This means that once education catches up with speculation the speculative price will very quickly match its fundamental value at zero.

Ironically discussions around price directed at cryptocurrency are detrimental to their value because if someone buys on the expectation of a price rise they are not adding to any utility, which is its further divisibility, due to increased use.

Bitcoin gets its fundamental value from its divisibility which is the size & growth of its network over the period of time from its inception without having had a centralised starting point or central point of authority to influence its growth. If you’d like to understand the importance of the paradox of the centralised starting point you can read my Medium Article titled “Bitcoin: The Paradox of the Centralised Starting Point” linked here —

The Bitcoin protocol that Satoshi Nakamoto defined in his Bitcoin White Paper as “Bitcoin: A Peer-to-Peer Electronic Cash System” is called Bitcoin Satoshi Vision, known as Bitcoinˢᵛ & has the ticker symbol BSV. To understand why this is you can read my Medium article titled: “Bitcoin: A Tail of Blockchain BTC/BCH/BSV” linked here —

Satoshi Nakamoto had a vision. That vision was Bitcoin. Bitcoin is Satoshi’s Vision. Bitcoin is BSV.

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